Hong Kong’s stock flagship benchmark, the Hang Seng Index, rose to a record high for this year of 17,284.54 on Thursday, as the Chinese mainland’s economic recovery and strong earnings from tech firms shored up investors’ confidence.
The Hang Seng Tech Index fell 0.54 percent to 3,554.3, while the Shanghai Composite Index added 0.27 percent to reach 3,052.9. The tech gauge has advanced about 9 percent in the past five trading days.
Kelvin Mo, senior strategist at Futu Securities, said the recent surge in Hong Kong tech stocks has been a crucial factor in driving both the Hang Seng Index and the tech index, given their significant representations in these indices.
Chinese internet giant Tencent Holdings Ltd closed 1.39 percent lower at HK$339.4 ($43.35) on Thursday, following a four-day rally. China Mobile Ltd, one of the country’s largest telecommunications companies, climbed about 3 percent in the past four trading sessions, reaching a peak of HK$70.8
ALSO READ: HKEX upbeat on outlook despite profit slump, IPO drought
“As the quarterly earnings season kicks off, the performance of Hong Kong-listed companies will be under the spotlight until the end of next month. Analysts are closely watching to see if the earnings results will meet, exceed, or fall short of expectations, as this will likely determine the sustainability of the current market rally,” Mo added.
Mike Leung Kit-man, responsible officer at Wocom Securities Ltd, said, “The recent upward momentum in the Hong Kong stock market is buoyed by specific sectors, especially technology stocks such as Tencent, telecommunications companies like China Mobile, and the banking stocks.”
Chinese internet giant Tencent Holdings Ltd closed 1.39 percent lower at HK$339.4 ($43.35) on Thursday, following a four-day rally. China Mobile Ltd, one of the country’s largest telecommunications companies, climbed about 3 percent in the past four trading sessions, reaching a peak of HK$70.8.
In the banking sector, China Merchants Bank Co led the gains with a 3.18 percent growth, closing at HK$34.1. The Hang Seng Bank Ltd followed with a 1.6 percent rise, ending the day at HK$101.6.
ALSO READ: HK woos top mainland ‘unicorns’ for IPO boost
Leung attributed the market’s performance to the relatively low valuations of the Hang Seng Index and the performance of A-shares, as well as the stable economic situation on the Chinese mainland.
The world’s second-largest economy grew 5.3 percent year-on-year in the first quarter, according to the National Bureau of Statistics of China. The country’s Manufacturing Purchasing Managers’ Index rose to 50.8 in March, returning to expansion territory after falling to 49.1 in February.
Kelly Chung, chief investment officer of Multi Assets at Value Partners, said “There are signs of a gradual economic recovery on the mainland, including improving PMI numbers and better-than-expected GDP. Investor sentiment has bottomed and improved, with some inflows returning to the market.”
The Asian high-tech sector also continues to see an upside in earnings, given the strong demand for artificial intelligence and other emerging technologies, she added.
READ MORE: Equity market rebounds on CSRC’s push to cement HK as international finance center
However, financial analysts remain cautious about whether the bullish sentiment will extend, citing mounting geopolitical tensions and ongoing high interest rates as chief factors that could hinder further growth.
Leung said he expects the high interest rates in the United States to persist, adding that the upcoming US election and potential escalation of political disputes between the US and China, along with the tense situation in the Middle East, have heaped pressure on the capital market.
“Therefore, I consider the recent performance of the Hong Kong stock market to be a rebound, and the target level is expected to be around 17,800 points. Market sentiment and investor confidence are still weak and the strength of the rebound will gradually weaken,” Leung said.
Chung said, “The higher for longer interest-rate cycle in the US and geopolitical risks will continue to be major headwinds to the overall market, including Asia and emerging markets.”
Whether the uptrend can be extended into early May will depend on the attitude of capital entering the market, wrote Francis Kwok Sze-chi, vice-chairman of the Hong Kong Institute of Financial Analysts and Professional Commentators, in a commentary column.
